PROBLEM IAccounting for Income Taxes (10 points)

-The records of David K Corp. provided the following data at the end of Years 2018 through 2020 relating to income tax allocation:

		Yr 2018		Yr 2019		Yr 2020
Pretax accounting income		300,000		280,000		280,000
Taxable income (tax return)		260,000		300,000		300,000

Assume David K has one temporary difference. He recognized an expense in 2018 for tax purposes (prepaid expense) of $40,000, which will be amortized for accounting purposes over the next two years. The tax rate for all three years is 30%.

1. Tax entry for end of year 2018.

Dec. 31, 2018

Assume everything is the same, but the tax rate in 2018 was 40%. (Tax rates for 2019 and 20120 are 20%)

2. Tax entry for end of year 2018.

Dec. 31, 2018